Ten Myths About Patents

Patent monopolies were an instrument during the guild era that regulated how knowledge could pass from master artisans to their apprentices. For some reason, this monopolization on knowledge and brake on innovation has survived into the free enterprise age, after 1850.

Many people have a lot of preconceptions about patent monopolies that aren’t true, just like a lot of people had preconceptions about the necessity of copyright before file sharing became widespread and people experienced it first hand. Most people don’t have first hand experience in patents, so this is an attempt to tackle the most common myths and misconceptions.

Myth 1: Nobody would invent anything if they couldn’t patent it.

Fact: People invent for a lot of reasons. Some people invent because they can. In this, they share a strong drive with artists. But focusing on the commercial innovation, nobody invents because they can patent the innovation. They invent because they can make money on it.

In practically all industries, this money is made from selling products and services relating to or incorporating the innovation. Patents do not sell products and are, for the most part, granted long after the related product is so old it is obsolete and no longer generating money.

If companies did not innovate, they would lose the ability to sell products, and therefore lose the ability to make money. This is much more relevant than the ability to patent something.

Myth 2: Patents drive innovation.

Fact: Patents do not drive innovation, they ban innovation. A patent is, by its very definition, something that bans the entire world except the patent holder from building and improving on a particular innovative step. If patents are driving innovation, which is claimed, then this outright ban must be shown to have side effects that somehow drive innovation to a larger extent than the extent to which the direct ban destroys it. No such side effects have turned out to exist.

To the contrary, patents are being used by incumbent industries to shut down disruptive competition. Rather than competing with better products and services, the current kings-of-the-hill are finding it more cost efficient competing with more expensive lawyers. This does neither drive innovation nor a healthy competitive market.

Myth 3: Nobody would invest in startups that don’t have patents.

Fact: The seasoned startup investors absolutely hate patents and the entire patent system. They compare it to a cancer in the economy. As soon as a company has any money at all, it will be sued for patent infringement on pure speculation. These purely speculative patent threats have been estimated to burn about 10% of all investment capital today.

Myth 4: Patents are good and useful as a measure of innovation.

Fact: This is the broken window fallacy. To measure innovation in terms of how many innovative steps have been stopped by legal means for the duration of a patent — usually 20 years — is just not dysfunctional, it deserves a whole array of psychological disorder diagnoses.

Just because you can get a number on something doesn’t mean it can be used as a measure. Particularly not so if the number is a quantitative measure of bans on innovation, and you are trying to use it as a measure for innovation potential.

Myth 5: The patent system derailed just recently with the advent of the patent troll. Patents can be brought back on track if the troll problem is dealt with.

Fact: Patents have always been a brake on innovation. Lately, the pace of ideas have picked up, and so the problem has become more obvious — but it has always been there. The Industrial Revolution was delayed 30 years because of Watt’s patent on the steam engine (and people who improved it were even put in jail). The flight industry was delayed 25 years because of patent wars. Broadcast radio was delayed by ten years twice — first when it arrived in the 1920s, and a second time when FM radio arrived.

Fact: A patent is only worth as much as you can spend on a lawsuit defending it. A small, poor inventor can’t even afford the application cost of €50,000 (average, including legal advice) for a European patent. That doesn’t even grant the patent, it’s just the application. Then, they will have to defend the patent in lawsuits against huge corporations, where one single patent lawsuit easily can (and typically does) run into millions of dollars in costs for each side. It’s plainly a joke that a small player can play in the patent arena, and it only offers protection for big players against small entrepreneurs.

Small and medium-sized businesses are increasingly shying away from patents, and politicians tend to see this as a problem, rather than considering the possibility that entrepreneurs have understood something that the politicians haven’t.

Fact: This is wrong on both accounts. First, the trade secrets and critical know-how today lie in the manufacturing process, and very rarely in the finished product, which can be patented. Second, have you ever read a patent? Its language is so convoluted that it is absolutely impossible to comprehend for a normal engineer skilled in the applicable domain. This is also what has led us to at least ten overlapping patents on common things like network plugs. Third, trade secrets are not bad. It is part of normal healthy competition to try to gain the upper hand over your competitor (and is something that the government should not interfere with).

Myth 8: Patents are good for the economy — just look at all the licensing going on.

Fact: The entire patent system is draining resources from all corporations, if nothing else because it is a balance of terror. You need a patent portfolio for yourself in order to avoid patent lawsuits from others: you need the capability to countersue to avoid the lawsuits in the first place. Many corporations have a stated policy of never using patents offensively. The whole system has become a quagmire that sucks resources out of research and development.

When an entrepreneur chooses to pay a patent license, it has very little to do whether the patent has merit or not. Rather, it is a cynical calculation of whether it is more economical to just cave in to the demands and pay the license, or more economical to go to court and challenge the patent and claim as such. The court option is very rarely the one with the most business sense. Therefore, the system has turned into law-backed extortion. On the other side of the scale, politicians see all the licenses being paid and take this as a sign that the patent system works, when it is a result of extortion against the entrepreneurs that drive our economy.

The only group that consistently gains from the patent system are the patent lawyers. With the exception of one industry, the patent system is a net loss to every single industry.

The one exception is the pharma industry, as they use the monopoly deadweight created by the patent system to tax the public for their own gains. (In Europe, 83% of pharma revenue is tax money, on average.)

Myth 9: Patents can’t be scrapped without being replaced with something else that encourages innovation.

Fact: Patents harm the economy and innovation. It is perfectly possible to remove a strong brake on innovation without needing to insert another brake of a different color. If somebody is banging you repeatedly over the head with a hammer, you have the right to ask them to just stop, without having to simultaneously give them an alternative tool to hit you with.

Myth 10: All practicalities aside, patents are morally justified. You should own what you create.

Fact: It is morally just that you can combine your own pieces of property into new kinds of property, using ideas that you get by yourself. Patents allow somebody else to ban exactly this, just because they thought of the idea independently earlier and managed to fill out some particular forms. This is independent of whether you have even heard of the patent holder. Patents are, therefore, a strong limitation on competition rights and property rights. If you have the right to own what you create, then patents need to go out the window.

Rick Falkvinge

Rick is the founder of the first Pirate Party and a low-altitude motorcycle pilot. He works as Head of Privacy at the no-log VPN provider Private Internet Access; with his other 40 hours, he's developing an enterprise grade bitcoin wallet and HR system for activism.

Discussion

A well-written, clear and concise summary. Truly your area of expertise.

Rutros

June 28, 2011

Expertise. I doubt that Falkvinge have ever read a hardware patent. However he has claimed, that nobody can understand what is written, which of course is nonsense and against the patent law.

Lennart Lindgård

July 18, 2011

Of course, patent texts can be read – by the right people. The text in itself is not rocket science. But I have owned a few patents (which cost me a large part of the capital of my small company) and found out that we really had no use for them. Large companies just ignored the patents and our licence fee demands and we did not have the money to go to court to claim it. Result: Expensive patents stopps small innovative companies, but not the large ones that can afford to go to court with expensive lawyers.
The patent system is exactly what Falkving says: Something that prohibits small innovative companies to improve technology of large corporations – not the other way around.

mgspan

May 14, 2012

I agree with Falvinge…I have read scores of patents in the field of engineering in which I have been working for 30 years (control engineering), and never managed to understand a thing from them that could help me design something…and that includes patents of my employers on devices which I worked on and understood perhaps better than anybody else in the world.

The language is normally intended to make an impression on judges and lawyers but to be incomprehensible on a practical technical level. Patent lawyers specialize in composing such language.

Jerker Montelius

June 21, 2011

A Humble suggestion

Why not tax patents?

For me it makes perfect sense.

An exponentially growing tax for every “live” patent.

A patent will terminate as soon as the levy is up and not been paid.
If you make money from a patent then well OK. you can pay the levy.
If you not make any money then you will not lose anything by letting the patent expire.

This scheme will more or less eradicate todays situation with dummy patens.

Lennart Lindgård

June 21, 2011

Excellent suggestion, except for the fact that this extra taxation would make the small entrepreneur even more the underdog, and will probably force him sell his patent to big corps..
And the the big companies would in practice be the only ones who can make enough money on the patents to cover an additional tax.
So sadly, this isn’t the solution.

Jerker Montelius

June 22, 2011

Well that can be taken into account. You can for example allow every person one “tax free” patent. That will benefit the common inventor over “big corporation”.

sto

March 14, 2012

this cannot work.
Simply because a big corp will make employees write the patent personally, and force them to licence it for a few peanuts.
Virtually every employee will sign 2-5 patents on a thing he never saw, and be happy to get a few peanuts. the bigger the corp, the bigger the signer pool.

another method, alredady used for fiscal and other tricks: just create thousands of fake firms, each one will get a few cheap patents.

Rutros

June 28, 2011

There is in fact such a “tax” already in that you have to pay a certain fee every year and shis fee is increasing every year.

I had the opportunity to work with patents and I thought that I should gave it a shot, find by myself if it was as bad as some people want us to know.

After a few weeks, I came to the conclusion: it is not as bad as some extremists are saying, it is worst than that. A lot worse!

The patent system is so absurd, so cynical, so dishonnest that, at first, I was not believeng what I was saying. It is so bad that you cannot talk about it without being seen as an extremist. In fact, it is a religion: it has always been like that and its sole justification is that it has always been like that, putting it in question can put you in trouble.

Also, it should be underlined that, unless tested in court, a patent is not necessarly valid. If you own a patent, it doesn’t mean that you own that invention. It means that, *at first glance*, the patent office thought that your application could be valid because there is at least one claim which has no *obvious* prior art and your application respect the procedure.

An accepted patent doesn’t mean anything else than that. And this is really huge.

I’m really interested by the fact that patent delayed radio and aviation. Do you have sources about that?

Paul Boddie

June 28, 2011

On aviation, the magic search terms to use are “Wright” and “Curtiss”. See here for more:

Exactly. The patent was granted 1906in the US. In Europe, there was no patent at all in Germany etc.. In US they settled the issue 1917. Falkvinge 25 years is in fact a pure Falkvinge Myth again. Of course the development went on regardless of the patent thicket!

So, by your account, since powered flight was only delayed by 15 years (1903 to 1918, when this part was settled), patents are perfectly good and everything is “another Falkvinge myth”?

I know you’ve been defending these monopolies ferociously, but seriously, having a key modern industry being delayed for more than a decade is unacceptable in any economic or development terms, and the mechanism that caused that needs to be killed as fast as possible.

plc

June 21, 2011

@Ploum: the book ‘Free Culture’ by Lawrence Lessig actually deals at least with the case of the delay of radio..

If you’re into the similar problems with the copyright regime, it’s a real good read

Lennart Lindgård

June 21, 2011

I used to be a fan of patents. I’ve actually owned a few small ones myself.
And I have a quite good view of how a patent looks like and how i legally works.
But when I open my eyes from the patent-religion that I realize I was under, and how an alternative (no patents) would look, I an definitely agains patents and I realize that patents is the large businesses way of protecting their assets long beyond their market value. A present, given by the heavy industrialists, finance persons and politicians of the early industrial era.

Rick, can you point me to one investor that invests in biotech startups that does not require patents to make investments?

pop

June 22, 2011

Did you miss the part that says “pharma is the only industry that benefits from patents”?

floodis

June 22, 2011

I think you missunderstood what he meant by that. Also that does not answer my question.

Mumfi.

June 23, 2011

In the case of pharma the situation is a bit different, as the state requires certain conditions to allow your wares. This conditions are a big cost and it must be compensated. The compensation is today given by the roundabout way of patents. This is not optimal. The better way would be to give the protection directly to the entity that pays for the fulfilment of the states condition.

Simply put, whoever pays for the licensing requirements of a new drug should get an exclusive right to sell it for a limited period proportional to the licensing costs. It is almost the result of the system we have today, except there is today no extra incentive to licence new uses of known, and therefore unpatentable, substances, or of holistic methods combining known substances, and so on.

Hmm… you mean the industry which jacks up medical costs and allows people to die because doing research on even certain genes is illegal due to patents?

Biotech should be federally funded.

ceebee

July 7, 2011

floodis,
Even if it’s true that it’s hard to get investor money without owning patents, that doesn’t say anything about whether the patent system is a good idea. It just shows that *given the system we have* you need patents to compete. If anything, this is an argument against patents, because it shows that the need to be “armed” with a patent portfolio is a barrier to entry for startups.

I don’t work with business angels to a level of detail so I can point at people that invest in specific branches – as above, I’ve stopped at the level of detail where I see mostly all investors expressing the same hatred for the patent system in various degrees of overtness, without digging into what their favorite types of companies are.

I have an idea, a crazy idea, we need some rich guys, and some smart guys…

they invent lots of useful things everyone wants, things many need, and things the gov, army, etc. really want.. then they patent it… and then refuse to produce any of it..

and that SHOULD, make almost everyone hate patents, the gov, army, public, etc… then they’ll probably get rid of it… but it’s just a crazy idea, it’d never work, you’d need democracy or communism for that to work or some other sort of government I don’t know much about…

just to explain why… if we had democracy, someone, or some group of people could call a vote on just about anything, (number needed to call vote, would ofc. be voted on) and then everyone who cared, could vote on it… if we had communism, everyone would have the same amount of authority, so if a few people wanted to change it, they’d say it, if a lesser amount didn’t want it changed, it’d be changed, easy.. (personally, I feel communism is just a faster form of democracy, although both are too easy to corrupt (anyone heard about humans trying out these things?)

rutros

June 26, 2011

@buglord
I think you are close to the core problem.
1. First it is not true that the patent system stop anyone from using the needed technology. It only stop commercial use for 20 years. This means also that everybody can use the idea for personal use from the first day.

2. You are right that the choice is between market economy and socialism. The patent system expand the market economy so that also expensive and risky technical projects can be realized. The alternative financing is through a centralized system. So far it is proven that a market economy is far superior to socialism in creating benefits to the people. Falkvinge will of course drive the society in a socialistic direction as we still want medicines and new hardware companies,

rutros

June 26, 2011

The 11th Myth of patents

Falkvinge´s (mythological) analysis says as always that all US problems with software patents is also valid: a) all over the world. b) also for hardware patents.

Neither is of course true, but why bother..

To prove this, as so many times before, he is using references to himself and Christian Engström. ( In his article Christian claims that no patent in medicines will reduce the total cost for medicines with 50% . The problem is that today cost for patented medicines is only 33% of overall costs , and that patented medicines need manufacturing and distribution to.)

Of course I forgot he is also using an liberiterian novel from 1850, in which patent is not mentioned at all.

However I think his most stupid change of well-known historical fact is that the modern patent system was introduced to open for the free trade in the Paris convention 1883, now signed by about 190 nations.. Without industrial protection, no free trade was possible.http://www.wipo.int/treaties/en/ip/paris/trtdocs_wo020.html

Lets see what scientific trained people says: In Bessen and Meurers book “Patent failure” 2008 pp 22

“Some have argued strongly that our policy prescriptions will not suffice. Economists Boldrin and Levine (2007) argue that the patent system does not work at all and should be abolished. We doubt that such an extreme move is warranted. Our evidence suggests that the patent system does pro¬vide positive innovation incentives for small inventors, and, on a larger scale, for chemical and pharmaceutical inventions. It seems likely that reform can improve notice and overall patent performance in some areas, especially since the patent system did provide positive innovation incen¬tives as recently as the 1980s.19
On the other hand, we are troubled by the expansionist view of the courts that “everything under the sun made by man” should be patentable, including software, business methods, and even mental correlations”

I certainly agree with them about the expansionist view, but luckily this is mainly an US concern. This has to be stopped.

Why is this shift in the economic calculations? ( However you must realize that the US studies, do not account for the cost that occurs when an idea never reach the market because no one want to risk the money. What is the value of the 20 years longer life that patent have given to us?)

In the US, they started to grant software patents in the 80th and in the late 90th, we observe new software patents caused 38% of the litigation cost and we can suspect the number is far far higher now.

The problem is now so big that Obama and the congress approved US biggest patent reform in 60 years. Now the system is more aligned to the rest of the world as well as hasban improvement of its legal efficiency.

But of course I am only referring to facts, which Falkvinge in his partial blindness forget to mention, but is well known to the research, the public and most of the pirate movement

Magnus

June 29, 2011

The big problem is the lack of accountability within the patent establishment. Dr David Martin, a former advisor in the Clinton administration and patent portfolio assesor, argued very well about that already back in 2004 at a conference in Brussels, but i think very few actually understood the part about accountability and the importance of it:

With some kind of reform introducing a big portion of accountability in the system (yes, good ol checks and balances) the incitements within the system would turn around and work against patents that harm society and possibly also get a conservative tendency to contract the patentable area. Today no one in the system risk go to prison if they grant stupid things, probably not even get fired. There is no check to it.

rutros

June 30, 2011

It was a bit funny to read this speech from a person, whose job is to let his customer believe that the world is so complex that his tool is the only thing that could sort it up.

He claims that there are 683 patents on a Ethernet plug. A fact, which is very easy to check. The truth is that there are 30 active patents which covers special designs to take up mechanical forces from the cable – to avoid fluids to enter the connector etc.

Anyhow I agree with you that accountability is a part of the problem. However the main problem is not the in patent office, but the fact that the final decision is maid in a court. This have made it possible to gradually expand the system.

Now Obama with his new reform will move this a little bit in the right direction thus the patent office have to correct some of their own decisions. and not the court.
There is a need for a tool to keep the patent system within its borders. Maybe an independent organization that challenges obvious patents etc and actions to correct the specific officer.

[…] like how measuring innovation with patents is a fallacy, today’s money — as a system of determining power — measures the wrong thing: how many […]

Frost

July 8, 2011

This is all true and thought-worthy – but as with virtually all analyses of modern day society and its features, it misses the central fact; patents won’t go anywhere because of the underlying mechanics of todays society. Specifically, in a money-based society where profit is God, patents are an inevitable feature, as are monopolies, oligopolies, crime for gain and war for gain, among other things.

What we have to do as a species is find the common denominator for almost all society’s ills if we can and then eliminate that common denominator – and many of us already believe that common denominator is money, the profit motive, and the warfare – ritualized in the form of “economics” or actual in the form of, say, invading Iraq to steal the oil – it inevitably creates due to its underlying mechanisms that go beyond the surface view virtually all humans have of money.

If by changing just one factor – ie, taking money out of the equation completely – we could fix most of society’s ills in one fell swoop, we have to do so and reorganize into something much more sane, like a resource-based economy or some other similar cooperation based society instead of today’s competition based one.

Everyone knows that patents serve to limit marketplace competition; indeed, that is part of the point of patents in the first place. But I don’t agree that they necessarily serve to ban improvements. In fact, the creativity involved in the process of “inventing around” a patent has immense potential to boost innovation. Isn’t that what Steve Jobs admittedly did in his quest to improve upon a more user-friendly personal computer? It’s what truly creative people do all the time.http://www.GeneralPatent.com/blog/

Lennart Lindgård

July 18, 2011

… Isn’t that what Steve Jobs admittedly did in his quest to improve upon a more user-friendly personal computer?…
Do you mean the introduction of a window- and icon-based operating system? Jobs stole happened to get a glimpse of the operating system “Smalltalk” from Xerox and decided to implement the exact same thing on the Apple Macintosh.
So, also the innovative expamples are built on improving something else. But Apple made it so much better than Xerox, being a smaller and more innovative company.
Smalltalk wasn’t patented, which made it possible for Jobs to do this.

Patents are important so that companies can protect their intellectual property. If patents were not allowed you would have countless companies that would piggy back every good idea and try to use it as their own. The market would become very diluted this way. People should be rewarded for their creativity, not punished.

“Fact: Patents have always been a brake on innovation. ”
Have they really? How can you claim this? And more importantly do anyone believe your claim? If anyone does they certainly must be very gullable.

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